Encinas Company produces a product that requires 6 standard pounds per unit. The standard price is $1.75 per pound. The company produced 2,300 units that required 13,400 pounds, which were purchased at $2.00 per pound. The product also requires 3 standard hours per unit at a standard hourly rate of $21 per hour. The 2,300 units produced required 6,600 hours at an hourly rate of $20.50 per hour. In addition, the standard variable overhead cost per unit is $1.90 per hour and the actual variable factory overhead was $11,905. Finally, the standard fixed overhead cost per unit is $1.20 per hour at 7,100 hours, which is 100% of normal capacity. Prepare an income statement through gross profit for Encinas Company for the month ended July 31. Assume that Encinas sold 2,300 units at $270 per unit. If an amount box does not require an entry, leave it blank.
Income Statement with Variances
Encinas Company produces a product that requires 6 standard pounds per unit. The standard price is $1.75 per pound. The company produced 2,300 units that required 13,400 pounds, which were purchased at $2.00 per pound. The product also requires 3 standard hours per unit at a standard hourly rate of $21 per hour. The 2,300 units produced required 6,600 hours at an hourly rate of $20.50 per hour. In addition, the standard variable
Prepare an income statement through gross profit for Encinas Company for the month ended July 31. Assume that Encinas sold 2,300 units at $270 per unit. If an amount box does not require an entry, leave it blank.
Direct material price variance = (Actual price - Standard price) x Actual Quantity
= ($2 - $1.75) x 13400 = $3,350 (U)
Direct Material Quantity Variance = (Actual Quantity - Standard Quantity) x Standard Price
= (13,400 - 13,800) x $1.75 = $700 (F)
Actual Quantity = 2300 x 6 = 13,800
Direct Labor rate variance = (Actual rate - standard rate) x Actual hours
= ($20.50 - $21) x 6600 = $3,300 (F)
Direct labor time variance = (Actual hours - standard hours) x Standard Rate
= (6600 - 6900) x $21 = $6300 (F)
Actual hours = 2300 x 3 = 6900 hours
Factory Overhead controllable variance = Actual Variable overhead - Standard variable overhead
= $11,905 - (6900 x $1.90) = $1,205 (F)
Factory Overhead Volume variance = (Standard hours - hours for normal capacity) x Overhead rate
= (6600 - 7100) x $0.60 = $300 (U)
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